What defines a recession?

A recession is defined as a significant decline in economic activity that lasts more than a few months. This is typically measured by a drop in Gross Domestic Product (GDP), income, employment, manufacturing, and retail sales, among other economic indicators. The duration and depth of the economic decline are key factors in identifying a recession, and it generally reflects widespread economic distress.

In contrast, a minor decrease in economic activity might not meet the criteria for a recession, as it lacks the severity and lasting impact. Stable economic growth represents an expanding economy and does not correlate with the characteristics of a recession. Lastly, full employment suggests a healthy economy where most people who want to work are employed, which is the opposite of the economic conditions during a recession, where unemployment typically rises. Thus, the definition that encapsulates the essence of a recession is the significant and lasting decline in economic activity.